On the Death of Global Sourcing and the Rise of Distance as a Key Procurement Equation

Yesterday, I introduced the concept that global sourcing is dead. What we have moved to instead is setting and enforcing procurement standards that matter as much locally as globally. But one thing that won’t go away when it comes to any global issue is distance. As Adam Brosch, a practitioner from Berlin Packaging LLC, hints at in a recent article on mitigating sourcing risks, there are 2 areas to consider when it comes to global: production scheduling and logistics.

These 2 topics are magnified and become inordinately more complex the longer a supply chain stretches. In fact, when it comes to managing global procurement operations, one could argue the intersection of procurement and supply chain, centered on these 2 areas, becomes that much more important.

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When it comes to production scheduling, Brosch writes, “Understanding lead times – not just for finished product but also for critical components and raw materials – can help you anticipate and avoid costly delays.” As for logistics, he suggests you “Make sure your supplier has a Plan B in case of loss, delay or damage, and that everybody understands the Incoterms terms of sale that govern each party's responsibilities.”

The Incoterm point is a good one – and also points to the fact that international logistics and customs and duties are unique elements of working with a global supply chain. Yet beyond these areas, global standards, such as enforcing supplier codes of conduct or regulatory compliance for conflict minerals, are pointing to the need to think about international procurement in new terms. Instead of global sourcing, it should be thought of as simply sourcing. Practitioners should apply the same guidelines and expectations they would normally use against a longer supply chain.

But how should practitioners approach considering and segmenting the different elements of distance when it comes to international procurement? I’ll share a few thoughts tomorrow in the next installment of the series.

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